[Edaily Cho Yong Seok Reporter Kim Young-hwan] Samsung Electronics and SK Hynix have rejected a proposal by Korea Electric Power Corporation (KEPCO) to prepay approximately 25 trillion won in electricity bills for five years. This decision is believed to be based on concerns about the medium- to long-term financial burden associated with prepaying such a massive amount of electricity bills.

According to KEPCO and business circles on the 14th, Samsung Electronics and SK Hynix reportedly conveyed that, following an internal review of KEPCO’s proposal for advance payment of electricity bills, they found it difficult to accept the offer.

Samsung Electronics and SK Hynix appear to have rejected the proposal due to concerns about the medium- to long-term financial burden associated with such a large-scale prepayment. Although the semiconductor market is currently performing well, driven by demand for artificial intelligence (AI), both companies reportedly judged that it would be difficult to prepay electricity bills based on the assumption that the current boom will last for five years.

Previously, KEPCO proposed that Samsung Electronics prepay approximately 20 trillion won and SK Hynix approximately 5 trillion won in electricity bills. This amount was calculated based on the electricity bills paid by the two companies last year—4.1 trillion won for Samsung Electronics and 900 billion won for SK Hynix—covering a five-year period from 2027 to 2031.

It is reported that KEPCO proposed a system whereby the two companies would pay an advance payment of 25 trillion won over approximately 12 months, after which their monthly electricity bills would be deducted from that advance payment. It is also reported that KEPCO proposed applying interest at a rate higher than that of two-year government bonds to the remaining advance payment and deducting this interest from the electricity bills on a semi-annual basis.

KEPCO delivered a proposal to Samsung Electronics and SK Hynix after meeting with the Ministry of Finance and Economy, as well as representatives from the two companies, last July. That same month, KEPCO President Kim Dong-cheol met with Kim Yong-kwan, Senior Vice President in charge of Business Strategy for Samsung Electronics’ Device Solutions (DS) Division, to discuss the prepayment system and the construction of a semiconductor power grid. It is reported that last month, KEPCO also held discussions with working-level officials from both companies to negotiate specific terms, such as the prepayment amount and interest rates.

KEPCO’s move to introduce the prepayment system stems from its massive debt burden. As of the end of June, KEPCO’s total debt stood at 210.7 trillion won. Interest expenses alone amount to approximately 11.5 billion won per day. A special government exemption that allowed KEPCO to issue bonds up to five times the sum of its capital and reserves—up from the previous limit of two times—is also set to expire at the end of next year.

KEPCO had expected that securing advance electricity payments would reduce the burden of issuing new corporate bonds while expanding funding for power grid investments. To this end, it had been considering the establishment of a separate “special provision for large-scale advance electricity payments.” However, with Samsung Electronics and SK Hynix deciding not to participate, setbacks are expected in the plan to raise large-scale funds through the advance payment system.